Synopsis: Petitioner, a long-term nursing care facility, challenged the de- termination of respondent concerning: (l) its denial of reimbursement for a 50-bed addition to its existing facility, the costs of which ex- ceeded the approved project cost; and (2) its denial of reimbursement for petitioner's interest amortization rate. The administrative law judge assigned to the case found that at the time of its purchase by new owners, a Certificate of Need had been issued to petitioner for the construction of a 50-bed addition at a total project cost of $600,000. Both the transfer of ownership oÂ the facility and the continuation of the Certificate were approved by the Depart- ment of Health. Petitioner began self-help construction on the project on May 30, 1977, the expiration date of its Certificate. Subsequently, the petitioner entered into a contract with a construction company for completion of the project; that company defaulted without having finished the project, and after having been paid $400,000. Construc- tion oÂ the project was subsequently completed at a total cost of $1,775,113 by a corporation owned by one of petitioners owners. Petitioner argued that respondent had unlawfully imposed a 'special limitation' upon the building cost component of petitioner's rate reimbursement formula, in that the total cost of construction exceeded the amount originally approved only because of the un- foreseen default of the original contractor. The petitioner contended that it was only at that point that it became apparent that additional spending was required and it notified the Department of the change, applying for an increase in costs at about the time the building was 60 percent completed. Hillcrest Manor u. Department of Human Services The judge rejected the argument that since petitioner's construction costs were beyond its control, it should be entitled to additional reimbursement, finding that petitioner contemplated expending funds beyond its approved limit subsequent to the project's commencement and before the contractor's default. In addition, the judge found that petitioner's application for a change in its Certificate was incomplete, thus preventing review of the application by the Department and that petitioner proceeded to exceed its spending limits without advising the Department in a timely manner. The administrative law judge con- cluded that the Department's denial of petitioner's application for its change of cost/scope was untimely and thus properly denied under N.J.S.A 26:2H-7. Petitioner also sought a capital facilities allowance exceeding the approved amount of the certificate of need, arguing that respondent had failed to apply N.J.A.C 10:63-3.10. That section requires the Department to review, on an individual basis, situations where strict adherence to regulations would be inappropriate. Based upon the evidence, the judge concluded that petitioner's property reimburse- ment had been correctly calculated and that no 'special limitation' had been imposed on petitioner. Upon review, this initial decision was adopted by the Director of the Division of Medical Assistance and Health Services. Bruce D. Shoulson, Esq., for petitioner (Lowenstein, Sandler, Brochin, Rohl, Fisher and Boylan, attorneys, NULL, NULL, NULL); Faith S. Hochberg, Esq., on the brief Robert J. Haney, Deputy Attorney General, for respondent (Irwin I. Kimmelman, Attorney General of New Jersey, attorney)